The Learning Curve

To help celebrate the 20th anniversary of its award winning Healthcare Marketing MBA program, St. Joseph's University asked Pharm Exec to convene a panel of nine top graduates working in the industry from the past two decades. Convene we did: our May 14 discussion summarized below highlights five themes that tomorrow's managers will need to address if the industry is to prevail in a world where bottled water commands a premium price while essential medicines are the last course in a beggars banquet.

William Looney, Pharm Exec: Gathered here today is a diverse panel of business school alumni who are actively engaged in the day-to-day tasks of turning a scientific premise into products that pack punch—with payers, providers, and patients. We also have two distinguished academics with acute powers of observation on how these doers actually "do it." Let's start with a perspective from the latter. What are the three or four issues that young managers must tackle to succeed in Big Pharma today?

Professor Bill Trombetta, St. Joseph's University Business School: The fundamental issue is to know your customer. It's the prerequisite for securing competitive advantage in a complex and increasingly crowded marketplace. Everyone talks about a new business model, but defining what that is—or whether any single model should suffice—remains elusive. The consensus, however, is that business practices must bend to the reality that after 30 years where blockbuster, small molecule drugs suitable for big patient populations kept falling from the sky, the good times are over. So how do you adjust to accommodate investor expectations for continued high performance?

You can't start that discussion until you circle back to the core, which is the customer. The industry has never spent much time examining the customer; because the health business is a public good, pharma firms treat the customer as a given. That's a huge mistake because the customer base is changing. The industry is far from the ideal relationship as was once described between Wendy's fast food restaurants and Coca Cola: without its supply of Coke, Wendy's simply could not compete. Clearly, Coca Cola was doing something for the Wendy's identity beyond supplying soda syrup. That is what Big Pharma has to do: identify that secret syrup that makes the customer relationship essential and symbiotic, virtually impossible to break.

Management is also learning from other industries that successful innovation often has more to do with process improvements rather than the product itself. Toyota, it can be said, has reaped enormous profits not from the flash of its cars but from the relentless efficiency of its global supply chain. Another example is Sysco, a restaurant service company that sells exciting things like canned hams. It set up a free business consulting unit to help its customers run their own kitchens. The motive was simple: If Sysco could help improve their customers business, then that would carry over to boost its own prospects, not to mention making it just a bit harder for competitors to elbow their way into the relationship.

These isolated examples prove the rule about the importance of thinking beyond the pill. When Business Week a few years ago completed a major world survey of the most innovative companies, the top ranks were filled with companies who executed brilliantly around a modest platform, such as Ikea and Walmart, whose new idea was to make consumption of consumer durables more accessible to the masses. Interestingly, despite being host and employer for dozens of Nobel Prize winners, not a single pharma company made the list.